Winchester Homes, Incorporated v. Osmose Wood Preserving, Incorporated Applied Research Group, Incorporated Chesapeake Corporation

Citations: 37 F.3d 1053; 1994 U.S. App. LEXIS 29160; 1994 WL 568870Docket: 93-1712

Court: Court of Appeals for the Fourth Circuit; October 19, 1994; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Winchester Homes, Inc. appeals the dismissal of its lawsuit against Osmose Wood Preserving, Inc., Applied Research Group, Inc., and Chesapeake Corporation, which was dismissed by the district court based on the law of the case stemming from a prior action in Virginia state court. The state court had dismissed several of Winchester's claims with prejudice or resolved them via summary judgment in favor of the defendants. The Fourth Circuit vacated the district court's dismissal and remanded for further proceedings, noting that the district court improperly relied on materials outside the pleadings without converting the motion to dismiss into a motion for summary judgment as required by Rule 12(b) of the Federal Rules of Civil Procedure. The appellate court reviewed the case de novo, considering the facts in the light most favorable to Winchester. Winchester's original claims included negligent design and manufacture, failure to warn, strict liability, breach of warranties, fraud, indemnity, and violations of the Virginia Consumer Protection Act, all arising from its use of fire retardant treated plywood in townhouse construction.

The state court dismissed several claims brought by Winchester, including negligent design and manufacture, failure to warn, and claims under the Virginia Consumer Protection Act, deeming them duplicative of warranty claims and strict liability claims. The court also dismissed the entire motion for judgment due to lack of standing but permitted Winchester to amend claims not dismissed with prejudice, particularly the fraud claim, which required more specificity. Following Winchester's amended motion for judgment, the court again dismissed claims related to business reputation and declaratory relief with prejudice, while allowing Winchester to provide a bill of particulars for claims that might arise from assignment or subrogation.

In subsequent filings, including a second amended motion for judgment, the court dismissed without prejudice claims related to subrogation for townhouses not yet repaired and reaffirmed the dismissal of the fraud and Virginia Consumer Protection Act claims with prejudice. A third amended motion for judgment led to further court scrutiny, where the court dismissed indemnity claims for unrepaired units without prejudice but upheld Winchester's standing to bring claims based on indemnification or subrogation for repaired townhomes. Claims related to units with assignments/releases post-barred claims were dismissed with prejudice. The court indicated potential summary judgment for the defendants on remaining claims, as Winchester lacked liability under its express warranty and acted as a volunteer in repairs. A final ruling on the motion for summary judgment was deferred, allowing Winchester time to submit additional documentation.

One week after the September 16, 1992 hearing, Winchester filed a motion for a nonsuit, leading to a state court order on September 23, 1992, which granted nonsuit against several defendants, including Chesapeake, ARGI, and Osmose, for all claims not involving Hoover Treated Wood Products' fire retardant treated plywood. The only adjudicated claim in state court was against Hoover. In an October 9, 1992 order, the court found that Winchester acted as a volunteer regarding its express warranties to homeowners, owed no legal duty to repair the plywood roof sheathing due to limited warranty claims, and that statements from Winchester's sales staff and Home Care and Service Manual were restricted by integration clauses. The court modified the nonsuit order, clarifying it did not affect claims submitted for decision before September 23, 1992. Winchester subsequently appealed to the Virginia Supreme Court, which dismissed the petition as moot, citing the nonsuit orders. 

On March 23, 1993, within six months of the nonsuit, Winchester filed a suit in the U.S. district court, alleging defects in the fire retardant treated plywood that posed dangers, leading to inspections and replacements in 544 roofs. Claims included negligent design and manufacture, breach of warranties, fraud, and violations of the Virginia Consumer Protection Act. The district court dismissed the suit on May 7, 1993, ruling that the law of the case precluded proceeding with counts previously dismissed by the state court and that Winchester's status as a volunteer negated any indemnity claims. The court denied Winchester's motion for reconsideration, reinforcing the state court's ruling regarding standing.

The district court dismissed all of Winchester's claims based on preclusion by state court rulings or the law of the case. The law of the case doctrine is examined, particularly regarding Winchester's nonsuit taken on September 23, 1992, under Va.Code Sec. 8.01-380(A). The Virginia Supreme Court declined to review Winchester's appeal due to moot assignments of error. No summary judgment ruling occurred at the September 16, 1992 hearing, as the state court permitted further briefing; thus, the case was not submitted for decision, allowing Winchester to take a nonsuit. This right to nonsuit is affirmed by Virginia law, which states that a party may do so before the court has made a decision. Subsequent state court orders regarding the dismissal of claims based on Winchester's standing are not considered the law of the case. The implications of Winchester's nonsuit on prior rulings, including the dismissal with prejudice of claims related to tort, warranty, fraud, and the Virginia Consumer Protection Act, are analyzed. Virginia law allows a party to nonsuit a cause of action or claim without prejudice to future litigation on the same cause. The nonsuit effectively ends ongoing litigation but does not bar subsequent actions between the same parties.

Nonsuit in the state court against three defendants encompassed all claims not involving Hoover Treated Wood Products' fire retardant plywood, resulting in the dismissal of the entire cause of action against these defendants. The Virginia Supreme Court deemed all of Winchester's assignments of error moot due to the nonsuit, indicating it ended the suit without prejudice, rendering prior court orders ineffective. This aligns with the general principle that a nonsuit resets the case as if it had never been filed. Although the Virginia Supreme Court has not explicitly adopted this principle, it reached a similar conclusion in a related case, holding that a nonsuit moots any questions raised by prior motions or rulings. The district court's reliance on earlier rulings was erroneous, as Virginia law requires mutuality for collateral estoppel, and the defendants from this appeal were not parties in the referenced case, thus not bound by its outcome. Consequently, the district court’s dismissal of Winchester's complaint was vacated, and the case was remanded for independent proceedings free from preclusive effects of prior rulings.

Winchester filed claims against Hoover Treated Wood Products in state court, resulting in a jury award of $434,185 for breach of express and implied warranties. The state court later granted judgment notwithstanding the verdict for Hoover, ruling that the warranties did not benefit the homeowners as the goods were incorporated into realty, which is not covered by U.C.C. warranties. Winchester's appeal to the Supreme Court of Virginia was denied, affirming the trial court's decision but not addressing other cases. Defendants claimed the state court held hearings regarding a nonsuit and that Winchester sought to prevent further orders through a writ, but no supporting documents were found in the record. Jurisdiction can be challenged at any time in Virginia courts. Virginia law allows a new proceeding on the same cause of action after a nonsuit, with a six-month tolling of the statute of limitations. It was noted that no products from Hoover were included in the nonsuit order, and dismissals of certain counts with prejudice are considered interlocutory, not final, thereby not establishing law of the case. The Supreme Court requires a final judgment for the application of such legal doctrines. Winchester’s request to examine the merits of the state court rulings was declined, as they are not applicable in this case and should first be considered by the district court.